Detroit: A city in distress struggles for rejuvenation

Albert Green, 86 years old, stands outside his well-kept home that sits next to a burnt, blighted, vacant home in the Delray neighbourhood of Detroit. Mr. Green and his wife of 68 years have lived in the home for 56 years where they raised four children.

Albert Green has spent two years trying to get the city of Detroit to tear down the house that sits next to his.

It's easy to see why. There's not much left of the ravaged structure, except for its blackened frame, and Mr. Green's biggest concern is that the house may catch on fire, again.

"It's frustrating," he said standing on the sidewalk in front of his house. "I have paid taxes since 1946 and this is what I get."

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Mr. Green, 86, has been living here for decades, running his convenience store, Green's Variety, and slowly watching the street fade from a vibrant community filled with families to one where his house is just about the only one left standing. His neat, white-sided home with potted marigolds out front is in sharp contrast to the half a dozen properties nearby, all left vacant and close to collapse.

This neighbourhood, not far from the bridge to Canada, is emblematic of large swathes of Detroit – a city where more than one million residents have fled since the auto industry started closing down plants in the 1950s, leaving empty buildings to fester in its wake. The financial crisis helped propel the city into bankruptcy and pushed the blight further across town. More than 80,000 buildings and vacant lots are in a state of disrepair. In Delray, where Mr. Green lives, nearly 70 per cent of his neighbourhood is empty.

Now the city is trying to figure out what to do with the blown-out structures. Getting rid of all the blight is critical to the city's economic recovery. It's a key step toward attracting new investment, new residents and new confidence. But it won't be easy.

A task force convened by the Obama administration has estimated that it will cost $2-billion (U.S.) to remove the blight. So far the city has received just $52.3-million from Washington, about enough to tear down 3,800 homes. There is some hope more funding will come as part of a massive restructuring plan that's being developed during the bankruptcy process. But there are many competing interests and creditors all vying for a piece of the action. A bankruptcy court judge will start deciding in mid-August which creditor will get paid and whether Detroit will have enough to start tearing down and rebuilding.

In the meantime, residents can only hope and wonder when the decrepit buildings in their neighbourhoods will finally be removed.

The scourge of blight

Detroit is surprisingly large, at least in terms of land mass. The city spans 370 square kilometres and has a unique mix of leafy estates, working-class neighbourhoods and some of the worst ghettos in America. Today, 38 per cent of residents live below the poverty level and the city's unemployment rate is more than double the national level of 6.1 per cent.

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There are some signs of change. The gleaming General Motors headquarters, appropriately called the Renaissance Center, sits by the river that borders Canada and is surrounded by a small but growing pocket of rejuvenated streets. Rents here are climbing, affluent out-of-towners are moving in and there's even a dog park, a sure sign of gentrification.

But that is the exception. Much of the city remains a place where street lights don't work and police officers routinely tell residents that they don't have the resources to respond to calls. In short, most Detroiters have learned to fend for themselves.

"I can't wait 10 years to get the house next door knocked down," said John George, who grew up in the northwest part of the city where he still lives.

Mr. George, 56, spent years in the insurance business but quit in 1988 to fight the blight that was creeping across his neighbourhood and countless others. He made the change after an abandoned home on his block turned into a crack house. Mr. George, who had a young family at the time, could see it from his back window and was enraged.

"People would come in every night, piss in the bushes and party," he said.

He didn't want to move, so he took matters into his own hands and boarded up the house. It worked. The night travellers took one look at the shuttered house and drove away.

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Today, Mr. George's "Motor City Blight Busters" business has worked on 1,500 ruined properties in northwestern Detroit, the bulk of which are in one of the hardest hit areas in the city called Brightmoor.

It appears to be an endless task. For every house that Mr. George and his team board up, refurbish or tear down, another unsightly property pops up.

"It took a long time to get in this mess and will take a while to get out of it," he said.

For now, Mr. George's Brightmoor neighbourhood has been excluded from receiving federal funds. That's because the city appears to be targeting areas that it can quickly stabilize. One is called Grandmont Rosedale, a wealthier part of northwest Detroit that is touched less dramatically by foreclosures.

With its winding roads, brick houses and decent schools, Grandmont Rosedale had always been a stable neighbourhood. But when the housing market imploded and sent millions of homes across the United States into foreclosure, a small strip within the community spiralled out of control. One row of houses leading to an elementary school was abandoned, something unheard of in this part of town. About 20 blighted properties have now been torn down, a move that is helping restore the neighbourhood back to its pre-crisis state.

Detroit's mayor, Mike Duggan, contends that every neighbourhood can have a similar future. But just how that can happen with scant resources and more than 80,000 properties in disrepair, isn't clear. And the real cost of blight is much bigger than the $2-billion price tag. Blight doesn't just hurt property values. It becomes a breeding ground for crime and a health hazard, all of which leads residents to flee.

'The houses went to hell'

Decades of neglect, bad management and an eroding economic base have driven people out of Detroit and into the surrounding suburbs in droves. The city's population has plummeted from 1.85 million in 1950 to less than 700,000, with more leaving almost daily.

The falling population and weak economy have contributed to the city's financial ruin. Unemployed residents can't pay property taxes or rent and abandon their homes. Soon scavengers rip the building apart and steal the hot water tank, fixtures, copper pipes, electrical wiring and just about anything else of value.

The houses become unsalable and no one has the money or interest in fixing them up. Rebuilding would cost up to $150,000 per property and even then the house would barely fetch $80,000 on the market. It's easier just to let them sit there. Fire damage is prevalent as it allows owners to recoup some of their losses through fire insurance.

"As quick as you clean it up, it's back," said Michael Christopher, 57, who has spent his entire life in Detroit and mows other people's lawns to try to keep his neighbourhood neat. He works two part-time jobs and witnessed his father lose his businesses in Delray.

The plight puts him and other residents in a tough spot.

Eighty-five-year old Mary Fraser lives close to Palmer Woods, a wealthy area near the upper limits of the city that sits next to a golf course and is lined with mansions belonging to former auto executives. But Ms. Fraser's street has become a target for arsonists and every house across from her is burned out.

"The houses went to hell," Ms. Fraser said from her sagging porch. "I hate to see it looking like this."

Ms. Fraser's neighbourhood looks completely uninhabited. Her son and grandson come by to mow the lawn, the only sign that her house has not been deserted. She moved to Detroit from Tennessee in the 1950s and worked until her hip gave out. Now she spends most of her time inside watching television.

Ms. Fraser would like to move, but said she can't afford to, as her only income comes from social security checks.

Unpaid property taxes

Removing blighted homes is costly and time consuming. The process can take months and costs run between $9,000 and $25,000, not including extra costs for taking out any asbestos and maintaining the vacant land.

For grassroots blight removers like Mr. George, the process takes much longer, especially as he has to rely on grants, donations and volunteers. First, he has to figure out who owns the property, and then buy it. There's also the cost of paying the city and gas company to disconnect utilities, and the time required to obtain permits to wreck the building.

Asbestos removal will add an additional $1,000 to $2,500 to the tab. The dumpsters cost money. The final task is to find volunteers, or pay workers, to demolish the house.

The city should be in the best position to remove houses, but the declining tax base means Detroit doesn't have the money. And with so many people out of work, the city's revenues are stretched thin.

"There's a tremendous amount of taxes not being paid," said David Szymanski, the chief deputy treasurer for Wayne County, which encompasses Detroit and other neighbouring cities.

"It is largely due to the fact that Detroit has gone from a population of 1.8 million to under 700,000. Therefore, we basically have housing for one million people who don't exist, so those properties don't generate any tax revenue," he said.

Just about $706-million is owed to Detroit in overdue taxes and penalties, according to detailed property data compiled for the city by Loveland Technologies.

"What has happened is that the situation got so bad that enforcement of collection of taxes became impossible," said Mr. Szymanski, who estimates that Wayne County loses more than $100-million a year in unpaid property taxes.

"It probably started off very innocently. 'I have limited amount of money. I can either pay my taxes or feed my family.' That's an easy choice to make," the deputy treasurer said.

The revenue shortfall combined with growing debts, political corruption and gross fiscal mismanagement finally pushed Detroit into bankruptcy a year ago. It is the largest municipal bankruptcy in the United States and the city owes more than $18-billion to thousands of creditors, including Wall Street banks, bondholders, retired city workers and pensioners.

The bankruptcy plan crafted by the state-appointed emergency manager, Kevyn Orr, provides the city with about $400-million to tackle blight, though the funds will come at the expense of creditors, who are expected to fight back.

If the bankruptcy judge approves the plan, Detroit still falls short of what's required to remove all the ailing structures. Even if the city found enough capital to raze the existing blight, it will be facing much more.

The scale of the problem is monumental. Roughly 26 per cent of Detroit's remaining houses are candidates for foreclosure. That's nearly 100,000 homes. On top of that, another 59,000 households are considered "tax distressed" because residents are behind on their property taxes, according to Loveland Technologies' website that maps out every property in Detroit.

"Tax distress is the clearest lens to the health of a neighbourhood. If you've got tax foreclosure, it is a bad sign," said Alex Alsup, the chief product officer with Loveland.

In recent years, Detroit, like many other U.S. cities, became a target for real estate speculators, eager to snap up houses that had plummeted in value. Rather than drive a rebound in home prices, however, they have contributed to the city's revenue shortfall, with many of the speculators buying houses and then failing to pay the property taxes. Owners are often hard to track down or unresponsive.

Beverly Frederick, 56, patrols her neighbourhood to make sure there is no blight. When she tried to get the listed owner of one property to take care of his battered house, he offered to pay her $40 to cut the weeds and vanished. That left Ms. Frederick and other neighbourhood volunteers to continually weed-whack and mow the lawn.

The city is now suing owners of abandoned houses and auctioning off houses seized through nuisance laws. Meanwhile Wayne county auctions off properties seized through tax foreclosures.

Urban agriculture

The foreclosures and blight have created another problem: what to do with all the cleared land. One in every three houses are gone and the vacant spots have become makeshift dumping grounds.

A city project called "Detroit Future City" developed a grand, all-encompassing plan that would repurpose a good chunk of the unused land into forests, farms and so-called green neighbourhoods lined with apartments surrounded by community gardens and forests.

The plan devotes 22 per cent of the city's land to traditional neighbourhoods, down dramatically from the current 58 per cent.

"Large-scale urban agriculture is part of Detroit's future," said Michael Score, the president of Hantz Farms, a venture created to buy and rehabilitate vacant city land. The company recently bought 150 acres of land in Detroit's east side and is growing a mixed wood forest on the site.

The owner of Hantz Farms, Detroit businessman John Hantz, watched the city become less livable and wanted to do something with the empty spaces. He is among a handful of business people that are trying to help rebuild the city.

Mr. Hantz started negotiating with officials in 2008 to buy the acreage. This year he succeeded and paid about $400,000. However the land came with about 70 blighted properties that will cost about $800,000 to remove. "Land is cheap, but the property is not," Mr. Score said.

Acres of saplings are now planted although the odd blighted house can still be seen from any point on the young farm. Eventually Mr. Hantz hopes to break even on the farm once the trees are large enough to sell.

Rejuvenating the downtown

The most high-profile investor in Detroit is Dan Gilbert, the founder of Quicken Loans, the country's second-largest retail mortgage lender. Born in Detroit and schooled in Michigan, Mr. Gilbert moved his corporate headquarters to the city from the suburbs in 2010.

He has spent around $1.3-billion to buy more than sixty Detroit skyscrapers and properties, including several city landmarks, and he controls the bulk of the downtown core.

Mr. Gilbert, who is on the Forbes "World's Billionaires List" with a net worth of $3.8-billion, has devoted much of his energy to rejuvenating Detroit. On top of co-chairing the federal-convened blight removal task force, Mr. Gilbert has donated funds to help map out the blighted properties as well as to save the Detroit Institute of Art from selling its collection to pay the city's creditors.

There is a youthful energy in the headquarters of his umbrella company, Rock Ventures, where the route to Mr. Gilbert's office involves passing a basketball court.

Rock Ventures hired more than 1,000 interns from dozens of colleges and universities across the country this year, training them in everything from marketing to mortgage banking. The average age of his employees is 28.

Jeremy Paolercio moved to Detroit from Manhattan for the opportunity. The 27-year-old is now working as a loan officer. In his one year on the job, he has been promoted and is earning more than he did in New York. "You can make a name for yourself here," said Mr. Paolercio, describing his move as becoming a big fish in a small pond.

That Mr. Gilbert's efforts have transformed downtown is beyond dispute. A 700-square-foot condo in downtown Detroit can rent for as much as $1,700 a month. Mr. Gilbert's organization has created 10,200 new jobs, though it is not known how many of those jobs were filled by Detroit residents.

"I do believe he is trying to rejuvenate the downtown area. I am all for it. But it doesn't affect the common man. ... It doesn't mean anything to the neighbourhoods themselves," said Jay Peltier, a Detroit realtor.

Staying put

Many describe the bankruptcy filing as a fresh start for the city. Housing prices have started to rebound and business is picking up in places. Investors are looking for deals, the downtown core is coming to life and Detroit has attracted worldwide attention, albeit more for the blight than its rich culture.

Back in Delray, there aren't many signs of change. The streetlight behind Mr. Green's house doesn't work and the other day he heard the sound of gunshots in his back alley.

In the old days, Mr. Green said he never had to leave the neighbourhood. He and his wife raised their four children here; there was a movie theatre, a hospital and five schools. He used to sell ice cream from his Green's Variety, which he has operated since 1959.

His daughter owns the only other house on his street that is not blighted or razed. She wants her parents to move, but Mr. Green, who has lived in Delray since he was one year old, refuses to leave. For him, this is home.

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